Mid-Continent University ceased instruction as of June 30, 2014

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Mid-Continent University was never loaned funds by the Department of Education (DOE). Federal Student Loans are made between the DOE and students only. This was a misrepresentation in the title of the report and in the second sentence of the report itself which reads, “The money the Department of Education loaned the school was from the Federal Student Financial Assistance program”.

On or about December of 2014 the DOE reported a broad claim of $26,904,960.17 to the U.S. Bankruptcy Court, Western District of Kentucky Division. A submission of claim is required by creditors in bankruptcy proceedings.

After MCU received court approval to manage its own Bankruptcy Plan, the school proceeded to dispute the amount of the DOE claim. On August 5, 2016, at 13:06:35 hours, MCU submitted a dispute of the DOE Claim No. 63. The DOE had a deadline of September 7, 2016, to respond to the dispute.

The DOE failed to meet the deadline and on September 7, 2016, at 16:02:02 hours, the court issued an order that disallowed Claim No. 63, made by the DOE in the amount of $26,904,960.17.

The DOE appealed to the court to allow them another chance to submit documentation in support of their claim. A hearing with MCU and the DOE was set to discuss the request.

WPSD was allowed to sit in on this hearing of the United States Bankruptcy Court, Western District of Kentucky. Nowhere in this report on the meeting did WPSD mention that the DOE failed to meet their opportunity to respond, had their claim of $26,904,960.17 dismissed and/or were now pleading for another chance to support their claim. That was the reason for this hearing.

On January 5, 2017, another hearing will be held to discuss this situation. As this is an active matter with the court, no other MCU comments will be made at this time.

MCU Correction – Third and Fourth sentence of WPSD Report, “ As part of that program, Mid-Continent was supposed to submit a close-out audit report 90 days after closing. It still has not submitted that audit.”

WPSD shifted the emphasis of this hearing from the fault of the DOE to a Close-Out Audit matter that was not even a part of the hearing.

Clarification - This is one of the main issues with this report. MCU received a Final Close Out report this summer. It is NOT involved in this hearing. The close out audit issue is with an Administrative Judge in Washington, D.C. at this time. The claim was for approximately $1M, not $26.9M. MCU immediately asked for and was granted a hearing to appeal the liability amount and prove errors in its basis. The hearing was granted but the DOE attorney Natasha Varnovitsky negotiated with MCU and MCU is being allowed more time to conduct the audit, which covers only approximately three months of funding in Academic Year 2013. MCU had to get the auditors approved by the court in early 2016 and the school is building funds to pay for the services from student debt owed to the university. The cost of the audit is approximately $40,000 because it includes an additional 9 months of work in which the USDOE had no financial transactions with the school.

There have been no further disputes related to the Close-Out Audit between MCU and the DOE.

MCU Correction – Fifth and sixth sentence of WPSD Report, “ The Department of Education says it came to an agreement earlier this month that in exchange for submitting a late close-out audit report, Mid-Continent should pay back some of the loaned money. The total is around $27M.”

WPSD made four significant misrepresentations in only one sentence.

First, they confused the Final Close-Out Audit report with the DOE Final Program Review Determination that the DOE was trying to get the judge to accept late as their support of their claim during this hearing.

Second, the statement that Mid-Continent agreed it “should pay back some of the loaned money” was false.

Third, the statement “should pay back some of the loaned money” implies again the DOE loaned MCU money. This is false.

Fourth, “The total is around $27M” is grammatically linked to the Close-Out Audit issue of approximately $1M, not $27M.

MCU Correction – Seventh sentence of WPSD Report, “An attorney for Mid-Continent said its now three person cannot keep up with the demands of conducting the audit and should be granted some forgiveness.” (MCU statement – This is the exact wording that was used by WPSD. The grammatical errors are not the fault of MCU.)

This comment again confused the separate issues of a Close-Out Audit that had already been addressed with an Administrative Judge and the a Final Program Review Determination that the DOE was trying to submit late as the total supporting document of their claim of $27M.

A Close-Out Audit is conducted by an independent licensed auditing firm and MCU is ready to conduct the work even with a small staff.

The statement that MCU requested that it should be “granted some forgiveness” is not correct. The Final Program Review Determination report is approximately 283 pages of information that MCU could immediately see lacked the proper basis of support needed for a claim of $27M. The MCU attorney argued that MCU would be prejudiced by having to go through such a report with a small staff compared to time when the Final Program Review Determination should have been issued years ago.

The “monopoly money” comment was related to any creditor’s claim that exceeded the total assets of MCU. The court documents called “OPRs” have been used by WPSD on their broadcasts. They contain the total assets of MCU which are below $27M.

Stating “the Department of Education won’t get back all $27M” explicitly implies they will get some of it back. That was not stated in the hearing.

MCU Correction – Ninth and tenth sentence of WPSD Report, “The judge gave the Department of Education the responsibility of determining what loans they could and could not forgive. So, now we wait for a response from the Department of Education.”

This statement is false.

The USDOE was informed that they had the burden to prove the actual amount of any liability they would claim against MCU.

The serious impact this misstatement can have is based on the use of the words, “loans” and “forgiveness.” Put together they can easily be confused with a DOE program called “Closed-School Discharge.” This program can provide for the forgiveness of loans made between students and the DOE under very specific circumstances. Student payments for debt to MCU could be impacted by such a statement implying that a NEW student loan forgiveness process may be available through the DOE. This is not a new forgiveness program.

MCU Correction – Eleventh sentence of WPSD Report, “Mid-Continent is expected to have another hearing in October.”

The next hearing on this matter is January 2017. There were no hearings related to this topic in October.

Attorney General Jack Conway and Mid-Continent University Enter into an Agreement to Offer Former Students Discounts, Flexible Repayment Options

In accordance with an “Assurance of Voluntary Compliance (AVC)” entered into with the Attorney General Jack Conway and approved today by the Franklin County Circuit Court, Mid-Continent University will begin sending letters to former students with remaining obligations to the school informing them of their options to settle their accounts. These options are available to the more than 90% of former Mid-Continent students who did not previously sign up for private institutional loans.

The options, which have been approved by the Federal Bankruptcy Court in Louisville to facilitate recovering obligations owed the University, offer the alternative of either receiving a thirty percent reduction in the amount owed if payment is made in full, or a ten year, zero-interest loan to pay the balance, reduced by 20%. Students who anticipated receiving a federal student loan also will have the option of receiving a replacement loan that is identical in all respects to the federal loan they would have received, including in-school deferment, forbearance, flexible repayment options and the offering of closed-school discharges for students who qualify.